Fred Harteis News Articles - Consumer prices fell over all for the second straight month in October, the government reported this morning, signaling that inflationary pressure in the economy appears to be gradually diminishing.
Coming after months in which prices rose steadily, much to the dismay of the Federal Reserve, today’s statistics should come as a relief to the inflation hawks at the central bank. Though the Fed has kept its benchmark short-term interest rate unchanged at 5.25 percent for several months, it did so with the caveat that further tightening might still be needed; the new figures would seem to give the bank more flexibility to keep rates steady for a while.
Wall Street appeared to agree. Stocks rose today on the New York Stock Exchange, adding to gains yesterday that pushed the Standard and Poor’s 500 stock index to a new high. The S. & P. 500 traded above the 1,400 mark for much of the day today, only the second time in more than six years it has reached that level (the first was on Wednesday). It closed just a quarter-point short of that high-water mark.
The consumer price report, released this morning by the Bureau of Labor Statistics, showed that retail prices fell 0.5 percent in October, following a similar decline in September. The October drop was sharper than economists had expected; the consensus forecast in a Bloomberg News survey was just 0.3 percent.
The “core” index, which omits the volatile prices of food and fuel to show underlying price trends more clearly, rose 0.1 percent in October; economists expected a rise of 0.2 percent.
October was the first month since February when core rate, which the Fed follows closely, has not risen at least 0.2 percent.
Stuart Hoffman, chief economist with PNC Financial, said that Fed policy makers “could hardly have scripted a more benign inflation report.” Falling energy costs have been a major factor for the last two months, reversing the effects of the spike in oil prices over the summer. The pump price for gasoline fell 11.1 percent in October. Energy prices in general fell 7 percent, the report found, accounting for much of the 0.5 percent overall decline in consumer prices.
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Source: NyTimes.com
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